ChartWatchers Newsletter logo

October 2007

ChartWatchers

AUGUST VS. OCTOBER - OPPOSITE ENDS OF THE SPECTRUM

by Chip Anderson

The panic selloff and subsequent recovery in August was nearly a mirror image of what we've seen in October. First, let's start with August. If you recall, we discussed how long-term market bottoms are marked by extreme bearish sentiment. The sentiment we saw in August doesn't get any more bearish. We had put call ratios routinely printing 1.30 to 1.40 and higher. The "equity only" put call ratio printed over 1.0 on 3 consecutive days, the first time that had happened since CBOE has been providing data to the public. For those of you unfamiliar with the put call ratio, it represents the Read More 

ChartWatchers

ANOTHER LEG LOWER

by Chip Anderson

The Consumer Discretionary SPDR (XLY) and Finance SPDR (XLF) broke down this week to signal a continuation of downtrends that began in July. In other words, the Aug-Oct rally was just a countertrend advance within a larger downtrend. XLF and XLF moved into bear mode when double tops were confirmed with support breaks in July. Both broke their March lows and forged lower lows. The advance over the last nine weeks retraced around 62% of the Jul-Aug decline and both ETFs met resistance near their 40-week moving averages (red arrows). This week's sharp decline ended this countertrend rally Read More 

ChartWatchers

CORRECTION UNDERWAY

by Chip Anderson

Two weeks ago I wrote an article that stated that it was a good time for a pullback. As it turns out the pullback started four trading days later, and it appears now that a full blown correction is in progress. It will probably take at least two or three weeks to complete the correction, and there will probably be something of a bounce before the correction low is found. Friday's down move was quite violent, but it also provided evidence that the market is getting short-term oversold. The following chart shows the Participation Index (PI), which measures short-term price trends and tracks Read More 

ChartWatchers

TECHNOLOGY REIGN COMING TO AN END?

by Chip Anderson

Over the past 18-months, the technology sector has outperformed the S&P 500 by a rather handy amount; however, we believe this trend towards technology out-performance is very close to ending. This has major implications in terms of "rotation" to be undertaken by mutual and hedge funds as they are currently very very overweight technology; hence a period of "de-leveraging" themselves may create an opportunity to be short the sector as the "doorway narrows" as everyone attempts to get out at the very same time. Technically speaking, we use the ratio between the S&P 500 "Spyders" Read More 

ChartWatchers

TWO DOW CYCLICALS TUMBLE

by Chip Anderson

The Dow Industrials were hit especially hard on Friday. A lot of that was due to big tumbles in two of its cyclical stocks – Caterpillar and 3M. Chart 3 shows Caterpillar falling 6% (on higher volume) to undercut its 50-day average. CAT appears headed for a retest of its 200-day line. Chart 4 shows 3M tumbling 7% on huge volume. Both relative strength lines are in downtrends. The fact that both stocks are considered be cyclical in nature (or economically-sensitive) suggests that the market is getting more worried about the U.S. economy. That view is supported by the fact that Dow stocks Read More 

ChartWatchers

OCTOBER LIVING UP TO ITS SCARY REPUTATION

by Chip Anderson

One thousand words: All the sectors are moving lower this month led by the Financials. Click on the chart to explore more. Read More 

ChartWatchers

A BREAKOUT FOR THE DOW TRANSPORTS

by Chip Anderson

Before looking at the chart for the Dow Transports, let's look at the Dow Theory situation. The Dow Industrials and Dow Transports both hit new highs in July and this marked a Dow Theory confirmation (bullish). Despite this bull market confirmation, both dropped sharply from mid July to mid August. In fact, both broke below their June lows and this development was bearish. The Dow Industrials quickly rectified this support break with a surge to new highs, but the Dow Transports could not get lift off and remained below its August-September highs. The Dow Transports has yet to confirm the Read More 

ChartWatchers

A GOOD TIME FOR A PULLBACK

by Chip Anderson

The market has had a good run since the August lows, but it is challenging all-time highs, and the technical support has been somewhat anemic. With many indicators reaching into overbought territory, and overhead resistance becoming an issue, it looks like a good time for a pullback or consolidation to digest recent gains. As for technical weakness, the first thing that strikes me is the failure of volume to confirm recent price gains. Note on our first chart that most of the volume bars supporting the recent rally are well below the moving average line. The next chart shows the failure Read More 

ChartWatchers

LISTENING TO THE COMMENTATORS

by Chip Anderson

Last week, both the Dow Industrials and the S&P 500 broke out to new highs last week in show of modest strength; but what we find more interesting that this circumstance is that the foreign markets aren't outperforming the US large caps. One only need understand that TV commentators; Wall Street strategists and the trading public is enamored with foreign market exposure , whether it be developed markets - or even emerging markets. A majority of incremental funds allocated to US mutual funds have gone towards international funds. This love affair with all things "international" is Read More 

ChartWatchers

HEAD IN THE (TICKER) CLOUDS

by Chip Anderson

Last week we launched our new Ticker Cloud feature. Have you seen it? It's a dynamic list of the most requested stocks we've seen over the past 15 minutes. Wanna see what everyone else is looking at? Get your head in the cloud! Read More 

ChartWatchers

WEEKLY MACD LINES TURN POSITIVE

by Chip Anderson

Last Friday, I wrote that the weekly MACD lines hadn't turned positive yet for the S&P 500, but were close to doing so. They turned positive this week. I wrote last Friday that "we need to see a positive crossing by the weekly (MACD) lines (or a histogram move over zero) to confirm that the current rally has enough strength to move to new highs". Both events took place this week. The chart below plots the weekly MACD histogram bars on top of the S&P 500. Intermediate buy and sell signals are given when the histogram bars move above and below the zero line. Since this is weekly Read More 

ChartWatchers

FALL SPECIAL AND FREE SHIPPING!

by Chip Anderson

I realize that the long-term ChartWatchers out there already know how important our specials are, but I wanted to take a moment to mention it to our newer members. One thing that has never changed at StockCharts.com is our pricing. We have had the exact same price for our subscriptions since we launched them way back at the start of 2002. How many other things in this world have not increased in price since 2002? I can't think of many things in that category. And, during the month of October, our prices have actually decreased. Right now, if you order a 6 month subscription, you will get Read More